Thursday, June 23, 2011

The Losses Are Beginning To Be Estimated From The Destruction Of The Birds Point Levee

May 2, 2011 was a black day in the lives of hundreds of people in southeastern Missouri, when the Army Corps of Engineers destroyed the Birds Point levee and intentionally flooded 130,000 acres of farmland and farmsteads in the New Madrid Floodway. Graphic pictures of destroyed farmland are circulating, and costs of the agricultural losses are beginning to be totaled.

The Birds Point Levee was the doorway to allow floodwaters on the Mississippi and Ohio Rivers to have somewhere else to go, other than to threaten the community of Cairo, Illinois. The New Madrid Floodway had been the product of flood control plans on the Mississippi following the 1937 flood of similar proportion. But the floodway had not been intentionally used previously and the breaching of the levee was disturbing to many and to others spelled the end of their farming livelihood.

To begin estimating the loss to Missouri farmers and farm owners, economists Scott Brown, Scott Gerlt, and Lori Wilcox of the Food and Agricultural Policy Research Institute at the University of Missouri initially calculated the 2011 crop loss. Their report assumes that no land will be replanted after waters recede this year, and warn that anyone who does attempt to plant may be subject to more flooding since the levee has not been restored and the land could re-flood.

The economists did not attempt to calculate the loss to hundreds of farmsteads, farm buildings, grain bins, livestock, and farm equipment caught in the floodwaters. Nor did they try to tabulate the removal of sand, rock and debris carried into the floodway and converted into a surrealistic moonscape. Their report also does not assess the long term impact of loss of soil tilth, humus, and nutrients, or impact on future crops that might be planted in future years. They say, “Effects beyond 2011 crop losses could add millions of dollars to the total impact of the floodway operation, but are beyond the scope of this report.”

The economists assembled a number of facts to determine the 2011 crop loss, including:
1) FAPRI acreage estimates for the current crop year and trend yields for the flooded counties, estimated at 173 bushels of corn.
2) Crop prices were based on the midpoint of the USDA range of prices for the new crop, adjusted for the local basis, which resulted in a corn price of $6.76.
3) Variable crop production expenses incurred by the time of the flooding, which was estimated by the fact crop reporters had estimated 50% of the corn had been planted.
4) Crop insurance data was not used because of insufficient information available.
5) SURE was included in government payments, but those will not be available until the fall of 2012.
6) FAPRI estimated the value of production at $85.2 million with net returns of $44.9 million after variable expenses were deducted.
7) The combination of foregone net returns and incurred production expenses totaled $60.6 million.
8) When crop insurance claims and other disaster programs are paid, FAPRI says losses decline to $42.6 million.

FAPRI plugged those numbers into an economic model used to assess the broader economic impacts of a change in the economy. Subsequently, it estimates the $85.2 million decline in value of crop production would result in a total economic value decline of $156.7 million. The additional losses indicate the effect that the levee breach had beyond agriculture.

The economists relied upon the current market prices, but say if they continue to rise this fall, then the value of the lost crop production will increase. They speculate that some of the flooded land may be planted to soybeans, and say that would lower the economic losses, and they will update their estimates as needed.

Summary:
The May 2 breaching of the Birds Point Levee in southeastern Missouri flooded 130,000 acres of farmland, causing a potential loss of $85 million for the 2011 crop year. While that is the lost value of crop production, crop production inputs lost and government payments adjust that figure to $42.6 million.